What is a Hard Money Loan?
Learn more about Hard Money Lending in Texas!
What is a Hard Money Loan?
A hard money loan is a short-term, real estate-backed loan used to acquire investment properties. Catalyst provides the money to both purchase and repair distressed properties. Hard Money loans, also called private money loans for real estate investments, usually involve far less red tape and documentation requirements.
The best way to ensure you’re making sound moves with your real estate investment strategies is to get educated. At Catalyst Funding, we want to ensure you understand all the facts behind how a hard money loan works.
Who Are the perfect candidates for hard money loans?
Property Investors
Both new and experienced investors! Anyone looking to fix and flip or fix and rent distressed properties with the intent of making a profit, hard money loans can be the perfect fit.
Fix & Flippers
Real Estate Investors looking to purchase distressed properties, repair them, and then sell for a profit. A hard money loan will allow them to quickly purchase the property and perform repairs without spending their own cash.
Buy & Hold Investors
Hard Money Loans are great for investors who purchase real estate properties with the intention of holding them for an extended periodto generate rental income and benefit from long-term appreciation.
Quick Flippers
Real Estate Investors who purchase properties with the intent of renovating and improving them quickly, then selling for a profit, usually within a few months.
Why Use a Hard Money Loan?
Advantages of a Hard Money Loan
- Receive loan funds quickly, usually within days.
- Qualifying is significantly easier for a hard money loan than for traditional lending.
- Leverage your cash with a hard money loan for more investment opportunities.
- Ensure you have cash available for that perfect home run deal with a hard money loan.
- Hard money loans are ideal for properties in disrepair, making them perfect for property flips, renovations, rehabs, rentals, and quick investments.
- Benefit from hard money loans with no pre-payment penalties.
- Many wholesalers and distressed sellers view hard money loans on par with a cash offer.
- We don’t make mistakes many private lenders make including:
- Running out of money to lend before closing or worse – during the draw period.
- Miss critical title, appraisal or zoning issues.
- Guidance on complex title issues, rehab or valuation questions.
How do I purchase real estate with a Hard Money Loan?
Just follow the steps!
Get Pre-Approved
Get pre-approved for a hard money loan. Do this before you start looking for properties. Good deals sell fast. It is too late to try and get pre-approved when you find a deal.
Find A Property
Begin searching both on market and start making connections with off market wholesalers to locate and secure a distressed property with your hard money loan pre-approval. Click here for relevant blog with tips to help!
Secure The Property
Submit a contract on the property with applicable pre-approval letter. Hard Money loans can close within 7 days, so make sure you have everything prepared ahead of time to perform the scope of work walkthrough and submit other necessary items prior to closing.
Renovate & Rehab
Renovate the property as needed. Ensure you are sticking with your scope of work to assure the properties after repair value. Keep in mind, hard money loans are intended to be short-term. So, make sure you complete this step quickly so you can maximize your returns by paying holding costs for the shortest possible time.
Sell or Refinance & Lease - PROFIT!
If your intention is to flip the property, then get it on the market, sell it, pay back the loan and make the profit! If you intend to keep the property as an investment, quickly refinance and lease to reduce your holding costs and start making income.
Whether you want financing for a quick sale or major renovations, hard money loans are typically the easiest and fastest way to secure financing as a real estate investor!
Why Use Hard Money Over Conventional Lending?
Speed
Hard money lenders are more interested in the quality of the investment and getting the minimum documents to ensure you are a quality applicant. Therefore, they ask for far fewer documents and the process is much faster and easier. Once you have a relationship with a lender, the process can move very quickly and smoothly, giving you an edge on closing deals fast.
Flexibility
Hard money loans are usually more flexible than traditional loans. Lenders evaluate each situation individually based on the investment opportunity. Traditional loan processes are rigid and time consuming. Hard money is faster and based on a deal making sense overall. At Catalyst Funding, most loan decisions are made in house and that autonomy is a big reason we average 5 stars on all social media platforms.
Fast Profit
Hard money loans are designed to be short-term loans. They get you cash fast, so you can quickly jump on an investment opportunity and make a profit. Even with a higher interest rate than a traditional loan, a hard money loan can help produce a higher profit because you are able to buy those attractive, distressed deals.
Opportunity
Most properties in poor condition will not qualify for conventional financing, and oftentimes, the best opportunities come from the ugliest houses. Also, property wholesalers will only sell to those with either a cash offer or an approved hard money loan from a reputable lender.
Tip: At Catalyst, our hard money loans have no prepayment penalty, so if you pay the loan off in a month, you only pay one month of interest.
What are your rates and terms?
Catalyst Funding offers some of the most competitive rates and terms on short and long term loans. That said, we believe in providing value over worrying about being the cheapest lender. We have a top notch team with great experience that will help you avoid mistakes and make more money, even if someone else might be a little cheaper.
For investors who are new to real estate financing, Catalyst Funding offers one-on-one consultations to discuss your goals and expectations for new projects.
When it’s time for your loan to close, here is what we need:
- Proof of Funds
- We will run your personal credit (no minimum FICO required)
- LLC, LP or Corp documents (if applicable)
- Property purchase agreement (if you have a deal)
- Property rehab scope of work (if you have a deal)
- Interest Only Loan
- Improved pricing for long-term relationships
- Minimal documentation required
- Approvals good for 6 months
- Borrower up to 75% ARV (after repair value)
- Six-month term with option of extending up to 12 months (fees apply)
